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Largo announces private placement for aggregate proceeds of up to CDN$23.58M

TORONTO, Dec. 28, 2016 /CNW/ - Largo Resources Ltd. ("Largo" or the "Company") announces a proposed non-brokered private placement financing (the "Offering") of up to 52,400,000 units ("Units") of the Company for aggregate gross proceeds of up to CDN$23,580,000.

Each Unit will be sold at a price of CDN$0.45, which price is equal to a 13.5% discount to the 5-day weighted average price of the common shares of the Company (the "Common Shares") on the Toronto Stock Exchange (the "TSX") on December 13, 2016, the day prior to the date on which the independent special committee of the board of directors of the Company approved the terms of the Offering, and a 4% discount to the 5-day weighted average price of the Common Shares on the TSX on December 22, 2016, the day prior to the date the Company filed for approval of the Offering with the TSX. Each Unit shall consist of one Common Share and one common share purchase warrant (a "Warrant"). Each Warrant will be exercisable into one Common Share at a price of CDN$0.65 per share for a period of three years from closing of the Offering. All securities issued in the Offering will be subject to a four-month hold from the date of issuance.

Insiders of the Company (the "Insiders"), including certain funds managed by Arias Resource Capital Management LP (the "ARC Funds") and certain entities controlled by Mr. Alberto Beeck, a director of the Company, may purchase up to the full number of Units offered for sale under the Offering. The Offering will not result in a change of control of the Company.

Shareholder Approval

As set out in the Company's press release of November 16, 2016, the syndicate of Brazilian commercial lenders (the "Lenders") under the Company's existing debt facilities is requiring an injection of working capital into the Company's operating subsidiary of not less than US$15 million dollars prior to December 31, 2016 as a condition of granting a new debt facility to the Company (the "2017Facilities") which would have the effect of pushing back principal and interest payments on the Company's existing debt facilities for an additional calendar year. Subsequently, the Lenders agreed to extend the December 31, 2016 date to January 10, 2017. Absent the 2017 Facilities, the Company will be required to begin making principal and interest payments effective January 15, 2017.

The Company currently has 423,765,993 issued and outstanding Common Shares on a non-diluted basis. There will be 476,165,993 Common Shares issued and outstanding on a non-diluted basis following closing of the Offering (assuming the issuance of the maximum number of Units under the Offering). Insiders may purchase up to the full number of Units being offered for sale under the Offering, Accordingly, an aggregate of 104.8 million Common Shares (including Common Shares issuable upon the exercise of the Warrants) representing approximately 24.7% of the current number of issued and outstanding Common Shares, could be issued to Insiders in the Offering. Over the course of the past six months and assuming closing of the Offering and the acquisition of all of the Units by Insiders under the Offering, an aggregate of approximately 115 million Common Shares (including Common Shares issuable upon the exercise of warrants) representing approximately 27.9% of the number of issued and outstanding Common Shares will have been issued to Insiders.

Section 607(g)(ii) of the TSX Company Manual requires the Company to obtain the approval of holders of a majority of the currently issued and outstanding Common Shares, excluding the votes attached to the Common Shares held by the Insiders who will participate in the Offering (the "Majority of the Minority"), because the Offering could result in the issuance of that number of Common Shares to Insiders as would be greater than 10% of the number of Common Shares issued and outstanding immediately prior to last issuance to Insiders within the past six month period.

Pursuant to Section 604(d) of the TSX Company Manual, the Company has obtained the approval of the Majority of the Minority for the Offering and the proposed Insider participation in the Offering by way of written consent. The ARC Funds, which collectively currently own approximately 59.86% of the issued and outstanding Common Shares on a non-diluted basis, and entities controlled by Mr. Alberto Beeck, a director of the Company, which collectively currently own approximately 8.74% of the issued and outstanding Common Shares on a non-diluted basis, may participate in the Offering. An aggregate of 253,662,190 Common Shares owned by the ARC Funds and 37,021,124 Common Shares owned or controlled by entities controlled by Mr. Alberto Beeck, were excluded from the Common Shares comprising the Majority of the Minority. The Toronto Stock Exchange has conditionally approved the Offering and granted listing approval of the Common Shares to be issued under the Offering subject to final acceptance on this basis, in lieu of requiring the Company to hold a shareholder meeting to approve the Offering.

The ARC Funds are a "Control Person" of the Company (as defined in the TSX Company Manual) by virtue of their current ownership percentage of the Company. The shareholders of the Company approved the creation of the ARC Funds as a Control Person of the Company at the annual and special meeting of the shareholders of the Company held on June 27, 2013. The Offering was considered and approved by the board of directors of the Company. Messrs. J. Alberto Arias, a director of Largo who is also the sole director of each of the general partners of the ARC Funds and who indirectly controls Arias Resource Capital Management LP, Sam Abraham, a director of Largo and an employee of Arias Resource Capital Management LP, and Alberto Beeck, a director of the Company, each declared a conflict and recused themselves from voting on the Offering due to the potential participation of the ARC Funds and certain entities controlled by Mr. Beeck in the Offering. Upon completion of the Offering, the ARC Funds may own up to 62.72% of the issued and outstanding Common Shares on a non-diluted basis (assuming the purchase by the ARC Funds of an aggregate of up to 45,000,000 Units in the Offering, representing approximately 21% of the issued capital prior to closing of the Offering assuming exercise of the Warrants, for gross proceeds to the Company of approximately US$15 million (approximately CDN$20.25 million)), and entities controlled by Mr. Alberto Beeck may own up to 10.3% of the issued and outstanding Common Shares on a non-diluted basis (assuming the purchase by entities controlled by Mr. Beeck of an aggregate of up to 12,000,000 Units in the Offering, representing approximately 5.7% of the issued capital prior to closing of the Offering assuming exercise of the Warrants, for gross proceeds of approximately CDN$5.4 million), provided that the gross proceeds of the Offering shall not exceed CDN$23.58 million.

The sale of Units to any of the ARC Funds or the entities controlled by Mr. Beeck under the Offering will be a "related party transaction" as defined in Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions ("MI 61-101"). The Company is exempt from the requirements to obtain a formal valuation or minority shareholder approval in connection with the Offering in reliance on sections 5.5(a) and 5.7(a), respectively, of MI 61-101, as the fair market value of the Units available for sale under the Offering to the ARC Funds or entities controlled by Mr. Beeck does not exceed 25% of the Company's market capitalization calculated in accordance with MI 61-101. The Company intends to file a material change report in respect of the Offering less than 21 days before the closing of the Offering as the Company requires the consideration it will receive in connection with the Offering immediately to satisfy the Lenders' working capital condition to the 2017 Facilities.

About Largo

Largo Resources Ltd. is a growing strategic mineral company focused on the production of vanadium pentoxide at its Vanadio de Maracás Menchen Mine. Vanadium is primarily used as an alloy to strengthen steel and reduce its weight. Vanadium enhanced steels are used in a vast and growing range of products that are used and encountered every day; including, rebar, automobiles, transport infrastructure etc. As trends in the steel industry now demand increasingly stronger and lighter products for advanced applications, the use of vanadium is expected to grow over the medium and long term. Largo also has interests in a portfolio of other projects, including: a 100% interest in the Currais Novos Tungsten Tailings Project in Brazil; a 100% interest in the Campo Alegre de Lourdes Iron-Vanadium Project in Brazil; and a 100% interest in the Northern Dancer Tungsten-Molybdenum property in the Yukon Territory, Canada. For more information, please visit www.largoresources.com.

Disclaimer:

This press release contains forward-looking information under Canadian securities legislation. Forward-looking information includes, but is not limited to, statements with respect to completion of any financings; Largo's development potential and timetable of its operating, development and exploration assets; Largo's ability to raise additional funds necessary; the future price of vanadium, tungsten and molybdenum; the estimation of mineral reserves and mineral resources; conclusions of economic evaluation; the realization of mineral reserve estimates; the timing and amount of estimated future production, development and exploration; costs of future activities; capital and operating expenditures; success of exploration activities; mining or processing issues; currency exchange rates; government regulation of mining operations; and environmental risks. Generally, forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". All information contained in this news release, other than statements of current and historical fact, is forward looking information. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Largo to be materially different from those expressed or implied by such forward-looking statements, including but not limited to those risks described in the annual information form of Largo and in its public documents filed on SEDAR from time to time.

Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Although management of Largo has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. Largo does not undertake to update any forward-looking statements, except in accordance with applicable securities laws. Readers should also review the risks and uncertainties sections of Largo's annual and interim MD&As.

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